1
00:00:05,800 --> 00:00:08,720
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

2
00:00:08,760 --> 00:00:11,520
Speaker 1: Along with my co host Lisa Bramowitz. Each day we

3
00:00:11,640 --> 00:00:15,120
Speaker 1: bring you the most important, noteworthy, and useful interviews for

4
00:00:15,200 --> 00:00:17,840
Speaker 1: you and your money, whether you're at the grocery store

5
00:00:17,960 --> 00:00:20,720
Speaker 1: or the trading floor. Find the Bloomberg p m L

6
00:00:20,840 --> 00:00:32,040
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now,

7
00:00:32,120 --> 00:00:34,400
Speaker 1: I want to talk about the big debate that's reaching

8
00:00:34,479 --> 00:00:38,080
Speaker 1: in bond markets. Are we on the precipice of much

9
00:00:38,159 --> 00:00:42,360
Speaker 1: higher yields in the US bond market much lower values?

10
00:00:42,560 --> 00:00:46,200
Speaker 1: Aren't we going to see this bond route develop and deepen?

11
00:00:46,320 --> 00:00:48,320
Speaker 1: And to answer this, I want to bring in Chuck Lieberman,

12
00:00:48,400 --> 00:00:52,800
Speaker 1: chief investment officer and founding member and Advisor's Advisor's Capital

13
00:00:52,840 --> 00:00:56,760
Speaker 1: Management LLC. He's also a Bloomberg profit He writes for UH.

14
00:00:56,880 --> 00:01:00,840
Speaker 1: The website Bloomberg View maintains Chuck. Thank you so much

15
00:01:00,880 --> 00:01:04,440
Speaker 1: for joining us. Right now, I'm looking at longer dated

16
00:01:04,640 --> 00:01:07,800
Speaker 1: treasuries that have lost more than three percent over the

17
00:01:07,800 --> 00:01:10,800
Speaker 1: past month. Do you think that this sell off is

18
00:01:10,840 --> 00:01:15,000
Speaker 1: going to deepen? A sure? Do? Um. The economy is

19
00:01:15,000 --> 00:01:19,240
Speaker 1: doing pretty well, the labor market is tight. Um every

20
00:01:19,240 --> 00:01:22,480
Speaker 1: measure we have on the labor market indicates that we've

21
00:01:22,520 --> 00:01:24,760
Speaker 1: got a progressive tightening of the labor market to a

22
00:01:24,840 --> 00:01:30,200
Speaker 1: level that is tight historically. Um, it looks like the

23
00:01:30,240 --> 00:01:33,679
Speaker 1: Phillips curve has flattened, which means that we're not paying

24
00:01:33,800 --> 00:01:37,360
Speaker 1: for that decline in the unemployment rate yet with higher

25
00:01:37,440 --> 00:01:41,160
Speaker 1: labor costs, at least significantly higher labor costs. But ultimately

26
00:01:41,160 --> 00:01:44,120
Speaker 1: I think we will, and so it's imperative that the

27
00:01:44,160 --> 00:01:47,200
Speaker 1: Fed get interest rates at least back to a neutral level.

28
00:01:48,040 --> 00:01:49,800
Speaker 1: Chuck Liberman, I wonder if you could just step back

29
00:01:49,840 --> 00:01:52,960
Speaker 1: for a second and maybe just opine on the idea

30
00:01:52,960 --> 00:01:55,680
Speaker 1: that you need to separate all the bad news that

31
00:01:55,920 --> 00:01:59,920
Speaker 1: is a constant torrent from all of the information necessary

32
00:02:00,080 --> 00:02:04,880
Speaker 1: to make decent investment decisions. Sure, well, it really comes

33
00:02:04,920 --> 00:02:08,480
Speaker 1: down to what determines the value of equities UH and

34
00:02:08,639 --> 00:02:14,840
Speaker 1: fixed income UM and UH. Theoretically, equity valuations are discounted

35
00:02:14,919 --> 00:02:18,640
Speaker 1: values of future expected earnings. Notice, I haven't said anything

36
00:02:18,639 --> 00:02:21,720
Speaker 1: about politics yet, I haven't said anything about climate. I

37
00:02:21,720 --> 00:02:24,040
Speaker 1: haven't said anything about a lot of other issues. Correct,

38
00:02:24,080 --> 00:02:27,920
Speaker 1: you're trying to keep it straightforward and simple, right, And UH,

39
00:02:28,200 --> 00:02:30,799
Speaker 1: that's really the issue when you look back in the

40
00:02:30,880 --> 00:02:33,480
Speaker 1: last thirty years, there have been lots of awful things

41
00:02:33,480 --> 00:02:36,440
Speaker 1: that have happened, and yet the equity market is at

42
00:02:36,480 --> 00:02:40,760
Speaker 1: all time high. How come it's because the companies have grown,

43
00:02:40,960 --> 00:02:45,119
Speaker 1: profits have grown, the companies are worth more, and cumulatively

44
00:02:45,400 --> 00:02:47,679
Speaker 1: that means the market is worth more and at a

45
00:02:47,720 --> 00:02:50,720
Speaker 1: record high. Chuck, why is now different? I mean people

46
00:02:50,760 --> 00:02:52,840
Speaker 1: have been saying that the economy has been looking better

47
00:02:52,880 --> 00:02:56,720
Speaker 1: steadily over the past few years. People have been expecting

48
00:02:56,800 --> 00:03:00,160
Speaker 1: higher yields for a long time. Now you have an

49
00:03:00,160 --> 00:03:03,000
Speaker 1: economy globally that's a wash with central bank cash. The

50
00:03:03,040 --> 00:03:05,799
Speaker 1: Bank of Japan and the European central banks are still

51
00:03:06,000 --> 00:03:09,560
Speaker 1: printing money. What's going to make the situation turned so

52
00:03:09,680 --> 00:03:13,080
Speaker 1: dramatically in the US? Well, I don't know that anything

53
00:03:13,120 --> 00:03:15,840
Speaker 1: has to change dramatically at all. I think we're on

54
00:03:15,880 --> 00:03:22,120
Speaker 1: a trajectory of pretty stable, almost systematic growth. Uh And

55
00:03:22,200 --> 00:03:24,840
Speaker 1: that growth rate, while lower than in the past, is

56
00:03:24,880 --> 00:03:28,600
Speaker 1: nonetheless more than fast enough to drive unemployment down. And

57
00:03:28,680 --> 00:03:31,480
Speaker 1: so we've pushed the unemployment rate to a level at

58
00:03:31,520 --> 00:03:35,360
Speaker 1: which it becomes a problem for labor costs. When you

59
00:03:35,600 --> 00:03:38,480
Speaker 1: survey firms or look at how firms feel about the

60
00:03:38,520 --> 00:03:42,000
Speaker 1: labor market. They're very, very consistent in reporting that it's

61
00:03:42,000 --> 00:03:44,240
Speaker 1: difficult for them to find the workers they need. Right.

62
00:03:44,400 --> 00:03:47,120
Speaker 1: But but all of this is sort of sort of

63
00:03:47,120 --> 00:03:50,120
Speaker 1: flies in the phase of the idea that with such

64
00:03:50,400 --> 00:03:53,720
Speaker 1: high valuations and stock markets, you have investors saying, look,

65
00:03:53,920 --> 00:03:56,119
Speaker 1: the second that the ten year treasury gets to three

66
00:03:56,160 --> 00:03:59,240
Speaker 1: percent yields two point eight percent yields, I'm buying because

67
00:03:59,240 --> 00:04:01,560
Speaker 1: you can't get that kind of reliable yield anywhere. I mean,

68
00:04:01,600 --> 00:04:04,880
Speaker 1: in other words, fundamentals don't make sense at this point. Well,

69
00:04:04,920 --> 00:04:07,480
Speaker 1: I would say that the stocks would even be attractive

70
00:04:07,520 --> 00:04:10,480
Speaker 1: if if thirty year treasuries or ten year treasuries for

71
00:04:10,520 --> 00:04:15,320
Speaker 1: that matter, we're three percent. When you can buy US equities,

72
00:04:15,440 --> 00:04:19,480
Speaker 1: quality equities that have dividend yields up close to three percent,

73
00:04:20,720 --> 00:04:24,720
Speaker 1: you really don't should not have interest rates as low

74
00:04:24,760 --> 00:04:28,479
Speaker 1: as they are. Uh. Stocks are clearly going to continue

75
00:04:28,520 --> 00:04:31,680
Speaker 1: to grow over the next decade and at a decent rate. Uh.

76
00:04:31,680 --> 00:04:34,719
Speaker 1: And you're getting that yield on many of those high

77
00:04:34,800 --> 00:04:38,520
Speaker 1: quality companies. Uh. Something is wrong. Stocks are miss price

78
00:04:38,640 --> 00:04:42,960
Speaker 1: compared to bonds, and I'll entertain a number of possibilities.

79
00:04:43,000 --> 00:04:47,640
Speaker 1: Bonds are badly overvalued. I would accept that proposition stocks

80
00:04:47,640 --> 00:04:52,000
Speaker 1: are somewhat undervalued. I am tempted to accept that proposition

81
00:04:52,080 --> 00:04:55,320
Speaker 1: because when I do dividend discount models, the interest rates

82
00:04:55,360 --> 00:04:59,200
Speaker 1: that prevail in the market today imply much higher valuations.

83
00:04:59,800 --> 00:05:03,840
Speaker 1: We typically ignore those valuations because people would be embarrassed

84
00:05:03,839 --> 00:05:06,680
Speaker 1: to suggest that the stock market is undervalued. And yet

85
00:05:06,800 --> 00:05:10,120
Speaker 1: if you look at interest rates compared to bonds, stocks

86
00:05:10,160 --> 00:05:13,200
Speaker 1: are cheap. So you can have it anyway which way

87
00:05:13,240 --> 00:05:16,800
Speaker 1: you want. Bonds are expensive, stocks are cheap, or some

88
00:05:16,880 --> 00:05:19,880
Speaker 1: combination of the two. Well, Chuck, let's say that you

89
00:05:20,000 --> 00:05:22,760
Speaker 1: adhere to the idea that it is a market of

90
00:05:22,839 --> 00:05:26,440
Speaker 1: stocks and not a stock market. What stocks or what

91
00:05:26,560 --> 00:05:30,920
Speaker 1: kinds of companies should you be invested in? Well, it,

92
00:05:31,320 --> 00:05:34,640
Speaker 1: I think we still reflect the trauma of two thousand

93
00:05:34,720 --> 00:05:37,760
Speaker 1: and eight. So the stocks that tend to be most

94
00:05:37,839 --> 00:05:42,679
Speaker 1: expensive are the ones that are typically considered safe or safer,

95
00:05:43,120 --> 00:05:45,200
Speaker 1: and the ones that are cheapest are the ones that

96
00:05:45,240 --> 00:05:48,960
Speaker 1: are traditionally considered riskier. So among the ones that I

97
00:05:49,040 --> 00:05:54,200
Speaker 1: considered cheap or the financials, the banks are very cheap

98
00:05:54,240 --> 00:05:57,640
Speaker 1: in my mind. Uh, energy, when you hold on when

99
00:05:57,640 --> 00:05:59,760
Speaker 1: you say banks are, you're talking about big money center

100
00:05:59,800 --> 00:06:04,240
Speaker 1: bank like JP Morgan Bank of America, as well as

101
00:06:04,240 --> 00:06:07,880
Speaker 1: Stanley City Group, City Group absolutely all of the above, um.

102
00:06:08,200 --> 00:06:11,200
Speaker 1: And then the regional banks were also pretty attractive. They're

103
00:06:11,200 --> 00:06:14,080
Speaker 1: not quite as cheap as the money center banks, maybe

104
00:06:14,160 --> 00:06:16,600
Speaker 1: because people were burned more in the money centers than

105
00:06:16,640 --> 00:06:20,040
Speaker 1: they were in the regionals. But I consider the regional's

106
00:06:20,080 --> 00:06:24,000
Speaker 1: attractive as well. UM. That's on the financial in the

107
00:06:24,000 --> 00:06:28,280
Speaker 1: financial sector, and then in uh energy, I consider the

108
00:06:28,279 --> 00:06:32,640
Speaker 1: pipelines very very cheap. UH. People got burned because of

109
00:06:32,680 --> 00:06:35,599
Speaker 1: the drop in oil prices, but you know, we're produced.

110
00:06:35,640 --> 00:06:39,080
Speaker 1: We're almost back to the record high production levels for

111
00:06:39,160 --> 00:06:43,160
Speaker 1: crude oil in the United States. The pipelines are caring more. UH.

112
00:06:43,200 --> 00:06:46,800
Speaker 1: The expectation is we're going to increase production going forward.

113
00:06:47,480 --> 00:06:52,640
Speaker 1: Fracking is becoming progressively more efficient, lower costs. Um, we're

114
00:06:52,640 --> 00:06:55,080
Speaker 1: going to consume more of this product. Somebody's got to

115
00:06:55,160 --> 00:06:58,040
Speaker 1: carry it, and yet the stocks are cheap. Well, So

116
00:06:58,080 --> 00:07:00,120
Speaker 1: here's what I'm struggling with. A lot of people have

117
00:07:00,200 --> 00:07:03,839
Speaker 1: said that the loose credit conditions has enabled the stock

118
00:07:03,880 --> 00:07:07,640
Speaker 1: market rise. And if you start to see tenure treasuries

119
00:07:07,920 --> 00:07:13,680
Speaker 1: at thirty year thirty three yields and above, that's going

120
00:07:13,720 --> 00:07:16,360
Speaker 1: to increase the borrowing costs of a lot of companies.

121
00:07:16,440 --> 00:07:20,760
Speaker 1: Won't that hit the stock market? Uh, it will to

122
00:07:20,960 --> 00:07:24,480
Speaker 1: some degree because stocks are not independent the bonds the

123
00:07:24,520 --> 00:07:27,360
Speaker 1: tour are integrated, and so if interest rates rise in

124
00:07:27,440 --> 00:07:30,880
Speaker 1: the in the bond market, bonds will provide more competition

125
00:07:30,960 --> 00:07:33,840
Speaker 1: for stocks. But I don't think the stock market is

126
00:07:33,880 --> 00:07:37,320
Speaker 1: priced at a level that reflects prevailing interest rates. So

127
00:07:37,360 --> 00:07:41,680
Speaker 1: I think the stock market can handle rising rates surprisingly

128
00:07:41,800 --> 00:07:45,720
Speaker 1: well unless those rates shoot up a lot more. Thank

129
00:07:45,760 --> 00:07:48,000
Speaker 1: you so much for joining us. It's truly a pleasure

130
00:07:48,000 --> 00:07:50,600
Speaker 1: to speak with you. Chuck Lieberman, chief investment officer and

131
00:07:50,640 --> 00:07:54,679
Speaker 1: founding member and Advisor's Capital Management, also a Bloomberg profit

132
00:07:54,720 --> 00:08:11,840
Speaker 1: who writes for our Bloomberg View website, Carl always a pleasure. Um.

133
00:08:11,880 --> 00:08:14,920
Speaker 1: I noticed that there's a story about the final list,

134
00:08:14,960 --> 00:08:17,200
Speaker 1: the short list. It has people such as X board

135
00:08:17,240 --> 00:08:22,600
Speaker 1: member Kevin Walsh, Jerome Powell, who is a current Fed governor.

136
00:08:23,360 --> 00:08:25,520
Speaker 1: Tell us who you think is at least in the

137
00:08:25,640 --> 00:08:28,400
Speaker 1: running and maybe just throwing some wild cards for us

138
00:08:28,400 --> 00:08:31,920
Speaker 1: to kind of understand. Maybe the president's thinking. Sure, absolutely,

139
00:08:32,000 --> 00:08:36,439
Speaker 1: so the shortlist is getting shorter, as as being leaked

140
00:08:36,440 --> 00:08:39,000
Speaker 1: to the press and whatnot. Uh, So we know that

141
00:08:39,240 --> 00:08:41,800
Speaker 1: we are zeroing in on a decision on a reduced

142
00:08:41,880 --> 00:08:44,560
Speaker 1: number of candidates, and that decision could be coming in

143
00:08:44,559 --> 00:08:49,319
Speaker 1: the next two to three weeks, maybe sooner. I think that, uh,

144
00:08:49,640 --> 00:08:53,160
Speaker 1: you know, there's a litmus test being applied to the candidates.

145
00:08:53,200 --> 00:08:57,160
Speaker 1: And so Donald Trump has said, how he's a low

146
00:08:57,200 --> 00:08:59,439
Speaker 1: interest rate guy, and he wants a low interest rate

147
00:08:59,480 --> 00:09:02,160
Speaker 1: FED chair. Uh and that's all. Find it nice. And

148
00:09:02,200 --> 00:09:06,200
Speaker 1: I think that is an important prerequisite which does disqualify

149
00:09:06,360 --> 00:09:09,760
Speaker 1: folks like John Taylor, because pretty much every iteration of

150
00:09:09,800 --> 00:09:12,600
Speaker 1: the Taylor rule that you look at would point to

151
00:09:12,920 --> 00:09:15,520
Speaker 1: higher interest rates and where they currently stand. So I

152
00:09:15,559 --> 00:09:18,080
Speaker 1: think that the Hawks are being crossed off the list.

153
00:09:18,559 --> 00:09:20,800
Speaker 1: And the other part of that litmus test is that

154
00:09:21,160 --> 00:09:24,720
Speaker 1: he basically wants to be sure that whoever's FED chair

155
00:09:25,120 --> 00:09:26,960
Speaker 1: is not going to stand in the way of his

156
00:09:27,080 --> 00:09:31,240
Speaker 1: economic agenda. And more specifically, that means if he is

157
00:09:31,320 --> 00:09:35,480
Speaker 1: passing tax reform, which could maybe not be so comprehensive

158
00:09:35,840 --> 00:09:38,320
Speaker 1: in terms of tax reform, but more of a a

159
00:09:38,400 --> 00:09:42,199
Speaker 1: sugar high from a tax cut that may not necessarily

160
00:09:42,240 --> 00:09:45,200
Speaker 1: be revenue neutral, at least in the short term. He

161
00:09:45,240 --> 00:09:47,120
Speaker 1: does not want a FED Chair to step in front

162
00:09:47,160 --> 00:09:49,720
Speaker 1: of that economic benefit. So if you're going to raise

163
00:09:49,840 --> 00:09:53,000
Speaker 1: rates as the president cuts taxes, you're probably not going

164
00:09:53,080 --> 00:09:55,920
Speaker 1: to be in the FED chair seat next year. All

165
00:09:56,000 --> 00:09:58,920
Speaker 1: this makes me question why Kevin Walsh is even in

166
00:09:58,960 --> 00:10:03,959
Speaker 1: the running. Well, the uh the Worsh family has some

167
00:10:04,000 --> 00:10:09,080
Speaker 1: connections to the president. Uh and he is well liked

168
00:10:09,120 --> 00:10:13,800
Speaker 1: among Republicans and conservatives, but uhh and he certainly is

169
00:10:14,000 --> 00:10:15,800
Speaker 1: a bit of a maverick, even though he was a

170
00:10:15,840 --> 00:10:19,000
Speaker 1: former governor. He's been highly critical of the Fed. Uh

171
00:10:19,080 --> 00:10:21,960
Speaker 1: So in those regards, I think he does appeal to

172
00:10:22,040 --> 00:10:26,760
Speaker 1: the President's sentiments and instincts. However, he was very dismissive

173
00:10:26,800 --> 00:10:30,000
Speaker 1: of the Fed missing on the inflation target earlier this

174
00:10:30,080 --> 00:10:33,240
Speaker 1: year in an interview with Mike McKee. Actually uh and

175
00:10:33,559 --> 00:10:36,800
Speaker 1: also he's concerned about financial stability risks, so he is

176
00:10:36,840 --> 00:10:40,000
Speaker 1: someone who also wants rates to be higher. Uh and

177
00:10:40,040 --> 00:10:43,920
Speaker 1: that again is not consistent with Trump's economic agenda. So

178
00:10:44,000 --> 00:10:48,360
Speaker 1: Bloomberg's shortlist that we've put out includes Kevin Walsh, also

179
00:10:48,440 --> 00:10:51,760
Speaker 1: Jenny Yellen, who is the current FED Chair, Also Jerome

180
00:10:52,000 --> 00:10:55,640
Speaker 1: Power Powell, who is a current FED governor. Um Neil

181
00:10:55,720 --> 00:11:00,360
Speaker 1: kesh Kari has gotten less attention, and yet Jeffrey Unlock,

182
00:11:00,440 --> 00:11:02,840
Speaker 1: the head of Double Line, came out and said that

183
00:11:02,920 --> 00:11:06,520
Speaker 1: he expects Kashkari to be the likely next FED chair.

184
00:11:06,600 --> 00:11:09,960
Speaker 1: Is he wrong? Well, we'll find out soon enough. I

185
00:11:10,000 --> 00:11:13,160
Speaker 1: think he is potentially on the short list, and he's

186
00:11:13,360 --> 00:11:16,480
Speaker 1: definitely the dark horse candidate does a bit of an outsider,

187
00:11:16,800 --> 00:11:20,960
Speaker 1: somewhat critical of the FED, UH and certainly dissenting at

188
00:11:21,480 --> 00:11:26,959
Speaker 1: several meetings over critical exact opposite standpoint than Marsh saying

189
00:11:27,000 --> 00:11:29,840
Speaker 1: that it's moving too quickly. Absolutely, so he's a low

190
00:11:29,960 --> 00:11:32,920
Speaker 1: rates guy, and he's saying until we see inflation hitting

191
00:11:32,960 --> 00:11:36,160
Speaker 1: the FEDS target, we should stop raising rates. UH. That

192
00:11:36,360 --> 00:11:39,120
Speaker 1: is music to the ears of the president. I wonder

193
00:11:39,200 --> 00:11:43,240
Speaker 1: called does this highlight the contradiction that seems to follow

194
00:11:43,679 --> 00:11:47,679
Speaker 1: President Donald Trump, which is that his previous statements and

195
00:11:47,800 --> 00:11:53,480
Speaker 1: many of his previous positions seem more liberal and more

196
00:11:53,800 --> 00:11:57,520
Speaker 1: a dovish in general, whether it is interest rates, whether

197
00:11:57,559 --> 00:12:02,679
Speaker 1: it is social policy, many topics. That is a divergence

198
00:12:02,760 --> 00:12:07,000
Speaker 1: to the Republican Party which he now leads, is that

199
00:12:07,120 --> 00:12:10,480
Speaker 1: the facto president, he leads the party, but he is

200
00:12:10,520 --> 00:12:14,000
Speaker 1: by no means a conventional Republican and so as he's

201
00:12:14,040 --> 00:12:17,680
Speaker 1: looking at FED chairs, that absolutely is the case as well.

202
00:12:18,000 --> 00:12:22,840
Speaker 1: Don't forget the President Obama chose Janet Yellen for the job. Um,

203
00:12:22,920 --> 00:12:26,559
Speaker 1: so he is not conventional I think a conventional Republican.

204
00:12:26,840 --> 00:12:30,240
Speaker 1: If it were Pence picking the FED chair, I think

205
00:12:30,280 --> 00:12:33,160
Speaker 1: Walsh would be very high up on the list. But

206
00:12:33,679 --> 00:12:38,000
Speaker 1: because of this focus on really labor economics, right seeing

207
00:12:38,040 --> 00:12:40,840
Speaker 1: if you can push that unemployment rate down and improving

208
00:12:40,920 --> 00:12:44,360
Speaker 1: the the status of the middle class and the working class,

209
00:12:44,400 --> 00:12:48,200
Speaker 1: those are democratic initiatives traditionally, uh, and that is a

210
00:12:48,240 --> 00:12:50,800
Speaker 1: priority of this president. And don't forget it's a lot

211
00:12:50,840 --> 00:12:54,640
Speaker 1: of Reagan Democrats that crossed over and voted for him

212
00:12:54,679 --> 00:12:58,960
Speaker 1: in those industrial Midwestern states, uh, that he's looking to

213
00:12:59,400 --> 00:13:03,360
Speaker 1: help out. Although President Trump himself isn't going through pages

214
00:13:03,400 --> 00:13:06,640
Speaker 1: of economists and trying to pinpoint the perfect FED chair,

215
00:13:06,760 --> 00:13:10,360
Speaker 1: So he is surrounded by some more traditional Republicans. Who

216
00:13:10,360 --> 00:13:12,960
Speaker 1: are his advisors on this? Who are they and how

217
00:13:13,040 --> 00:13:16,480
Speaker 1: much power do they have in selecting the next FED chair? Well,

218
00:13:16,520 --> 00:13:20,240
Speaker 1: I think Minuchin and Cone have both been influential in

219
00:13:20,280 --> 00:13:23,800
Speaker 1: this regard. I think that cons chances because he was

220
00:13:23,880 --> 00:13:28,360
Speaker 1: originally considered to be on the shortlist diminished after the Charlottesville,

221
00:13:28,600 --> 00:13:33,040
Speaker 1: Virginia violence and the you know, the president wants uh

222
00:13:33,280 --> 00:13:36,040
Speaker 1: loyalty in that FED candidates, so he wants a low

223
00:13:36,040 --> 00:13:39,200
Speaker 1: interest rates person. He also wants a loyal person, uh,

224
00:13:39,240 --> 00:13:41,439
Speaker 1: and I think those are the priorities. So the committee

225
00:13:41,480 --> 00:13:44,240
Speaker 1: shapes to some degree, but the final say will absolutely

226
00:13:44,360 --> 00:13:47,000
Speaker 1: be his and arguably this will be one of the

227
00:13:47,160 --> 00:13:51,200
Speaker 1: key moments for a FED chair to really dictate the

228
00:13:51,200 --> 00:13:54,959
Speaker 1: direction of policy going forward, considering that the FED is

229
00:13:55,000 --> 00:13:58,640
Speaker 1: about to start unwinding its balance sheet and conceivably they

230
00:13:58,679 --> 00:14:01,560
Speaker 1: could speed that process up for low it down. Carl Orgadana,

231
00:14:01,600 --> 00:14:04,240
Speaker 1: thank you so much for joining us. As always, Cargadona's

232
00:14:04,280 --> 00:14:19,040
Speaker 1: chief US economist for Bloomberg Intelligence. Return our attention now

233
00:14:19,120 --> 00:14:24,920
Speaker 1: to Argentina. Argentina's benchmark stock index, the Marvel, down about

234
00:14:25,040 --> 00:14:28,960
Speaker 1: one point three percent today, and that concludes a winning

235
00:14:28,960 --> 00:14:34,720
Speaker 1: streak of thirteen consecutive sessions where the stock market moved

236
00:14:34,840 --> 00:14:38,480
Speaker 1: higher and the polls a show that there are is

237
00:14:38,520 --> 00:14:43,400
Speaker 1: a friendly attitude towards Mauricio Macri. The government is likely

238
00:14:43,520 --> 00:14:48,120
Speaker 1: to maintain its position in the October legislative decisions, and

239
00:14:48,160 --> 00:14:51,880
Speaker 1: the Marvel index is up fifty eight percent year to date.

240
00:14:52,240 --> 00:14:55,240
Speaker 1: Here to tell us more about Argentina is our own

241
00:14:55,360 --> 00:14:58,280
Speaker 1: editor in chief emeritus for Bloomberg News, Matt Winkler. Thank

242
00:14:58,320 --> 00:15:02,480
Speaker 1: you for coming in. What does Asians has mockery made

243
00:15:02,920 --> 00:15:07,440
Speaker 1: that would encourage investors? Thank you, pim pleasure to be

244
00:15:07,520 --> 00:15:10,320
Speaker 1: with you. You know, there are two things that he

245
00:15:10,440 --> 00:15:14,120
Speaker 1: had to address immediately and he promised to. One was

246
00:15:15,040 --> 00:15:18,880
Speaker 1: runaway cost of living otherwise known as inflation, and the

247
00:15:18,920 --> 00:15:21,760
Speaker 1: other was the peril of default, the kind of yin

248
00:15:21,840 --> 00:15:27,240
Speaker 1: and yang of modern times for people living in Argentina

249
00:15:27,480 --> 00:15:32,840
Speaker 1: and uh not as you would expect UM anything close

250
00:15:32,880 --> 00:15:36,560
Speaker 1: to a developed economy. And so far, so good. He's

251
00:15:36,680 --> 00:15:41,600
Speaker 1: almost two years into his presidency and the inflation rate

252
00:15:41,680 --> 00:15:47,280
Speaker 1: is collapsed. It's down from a hive about to twenty

253
00:15:47,320 --> 00:15:49,920
Speaker 1: And if you look at the Bloomberg and look at

254
00:15:50,000 --> 00:15:54,160
Speaker 1: what economists anticipate over the next year, it's gonna get

255
00:15:54,240 --> 00:15:58,800
Speaker 1: to eleven percent within twelve months, and even some people

256
00:15:58,800 --> 00:16:03,440
Speaker 1: are saying single dig it's UM by two thousand nineteen.

257
00:16:03,880 --> 00:16:05,800
Speaker 1: So that's one thing. And the other thing is the

258
00:16:05,880 --> 00:16:11,840
Speaker 1: debt market. You know, in Argentina is UM outperforming most

259
00:16:11,840 --> 00:16:17,520
Speaker 1: emerging markets, and UM that's a real turnaround. So those

260
00:16:17,560 --> 00:16:20,480
Speaker 1: are the two things he's done. They're both big, and

261
00:16:20,560 --> 00:16:25,239
Speaker 1: he's brought Argentina actually to the forefront of global investors

262
00:16:25,280 --> 00:16:30,080
Speaker 1: by making it the best performing market in Latin America.

263
00:16:30,240 --> 00:16:34,240
Speaker 1: And that that wonderful streak that you referred to at

264
00:16:34,280 --> 00:16:39,520
Speaker 1: the outset here, Um, that's the longest winning streak for

265
00:16:39,560 --> 00:16:43,640
Speaker 1: the stock market since it's it's just shocking, really the

266
00:16:43,760 --> 00:16:48,320
Speaker 1: rally here, especially considering the vitriolic decade long battle between

267
00:16:48,320 --> 00:16:52,320
Speaker 1: creditors in Argentina after its latest default. It has defaulted

268
00:16:52,400 --> 00:16:54,520
Speaker 1: numerous times in its sovereign debt. And here you're looking

269
00:16:54,560 --> 00:16:57,440
Speaker 1: at Argentinian bonds price in US dollars that have rally

270
00:16:57,520 --> 00:17:00,800
Speaker 1: nearly thirteen percent so far this year. Matt, can you

271
00:17:00,840 --> 00:17:04,320
Speaker 1: give us a sense of what President McCree said to

272
00:17:04,359 --> 00:17:08,240
Speaker 1: you that gave you confidence that they could continue on

273
00:17:09,040 --> 00:17:12,440
Speaker 1: a rather auspicious path. So there are two things that

274
00:17:12,600 --> 00:17:16,880
Speaker 1: make him um, if you will, a unique um. One

275
00:17:17,040 --> 00:17:23,200
Speaker 1: is he's the first leader president elected who isn't a

276
00:17:23,280 --> 00:17:27,280
Speaker 1: parnast in a hundred years, nor is he affiliated with

277
00:17:27,320 --> 00:17:29,800
Speaker 1: any of the left wing alternatives. So he's right in

278
00:17:29,800 --> 00:17:33,359
Speaker 1: the center, and he's a bit of a pragmatist and

279
00:17:33,640 --> 00:17:36,680
Speaker 1: very practically. He's an engineer by training, so he looks

280
00:17:36,680 --> 00:17:40,480
Speaker 1: at things very analytically. Um. So that's one thing. The

281
00:17:40,520 --> 00:17:43,520
Speaker 1: second thing is he said to us, you know, I'm

282
00:17:43,520 --> 00:17:47,800
Speaker 1: committed to reducing poverty. Now you wouldn't necessarily expect that

283
00:17:47,880 --> 00:17:52,600
Speaker 1: from someone who is in the center, and yet he's

284
00:17:52,680 --> 00:18:01,800
Speaker 1: managed to embrace a very um pluralistic, diverse constituency in Argentina.

285
00:18:02,040 --> 00:18:04,879
Speaker 1: You know, both people who are well off and people

286
00:18:04,920 --> 00:18:08,560
Speaker 1: who are the opposite. I think that's what sets him apart.

287
00:18:09,320 --> 00:18:11,760
Speaker 1: Does he it was there any conversation or does he

288
00:18:11,840 --> 00:18:14,360
Speaker 1: recognize that there are a lot of rules and regulations

289
00:18:14,400 --> 00:18:17,679
Speaker 1: about the kinds of investments that made in Argentina and

290
00:18:17,720 --> 00:18:21,359
Speaker 1: the reciprocity that exists. So, for example, BMW how to

291
00:18:21,440 --> 00:18:25,280
Speaker 1: export a certain amount that equal the amount of automobiles

292
00:18:25,280 --> 00:18:27,200
Speaker 1: they sold. I mean, they're all these wacky rules there.

293
00:18:27,320 --> 00:18:34,000
Speaker 1: He would given his brothers, he would eliminate, via many reforms,

294
00:18:34,160 --> 00:18:39,680
Speaker 1: most of the bottlenecks that you've just identified that prevent

295
00:18:40,040 --> 00:18:43,320
Speaker 1: the economy from performing as it should. And he's committed

296
00:18:43,359 --> 00:18:46,080
Speaker 1: to doing so. But he recognizes, and he says as

297
00:18:46,200 --> 00:18:50,680
Speaker 1: much when we speak with him, that it can happen overnight,

298
00:18:50,800 --> 00:18:53,320
Speaker 1: and he has to essentially bring people with him, and

299
00:18:53,400 --> 00:18:57,359
Speaker 1: he can't do anything that would be considered too abrupt

300
00:18:58,240 --> 00:19:01,840
Speaker 1: because he would lose the opportunity to do the big stuff.

301
00:19:01,880 --> 00:19:05,240
Speaker 1: So he's got to focus on a kind of gradualistic

302
00:19:05,840 --> 00:19:10,720
Speaker 1: approach to reform. I was struck by an article on

303
00:19:10,760 --> 00:19:14,879
Speaker 1: the Blueberg earlier this month where or actually it was

304
00:19:14,960 --> 00:19:18,000
Speaker 1: last year, but Lawrence Fink, the head of black Rock,

305
00:19:18,160 --> 00:19:22,040
Speaker 1: was talking about meeting with President McCree UH and that

306
00:19:22,119 --> 00:19:25,720
Speaker 1: this convinced black Rock to be long term investors in

307
00:19:25,760 --> 00:19:29,920
Speaker 1: the nation. And this struck me as particularly interesting that

308
00:19:30,400 --> 00:19:34,080
Speaker 1: McCree was aligning himself with Wall Street even after what happened.

309
00:19:34,320 --> 00:19:40,000
Speaker 1: How important is that to his success? Very because you know,

310
00:19:40,080 --> 00:19:45,159
Speaker 1: Larry Fink is UH running, if you will, the largest

311
00:19:45,520 --> 00:19:54,639
Speaker 1: money management concern UM. And Argentina needs global investors because

312
00:19:54,760 --> 00:19:59,199
Speaker 1: so much of its financing is done through the liquidity

313
00:19:59,280 --> 00:20:01,720
Speaker 1: that comes out of the global market. So as long

314
00:20:01,760 --> 00:20:06,880
Speaker 1: as the global market is UH poised to do what

315
00:20:07,119 --> 00:20:10,639
Speaker 1: Argentina needs, that's good for Argentina. It does not have

316
00:20:10,840 --> 00:20:15,480
Speaker 1: at the moment anything like the financial system domestically that

317
00:20:15,480 --> 00:20:18,800
Speaker 1: would enable it to do what it needs to do so.

318
00:20:19,119 --> 00:20:22,919
Speaker 1: Global investors are all important in having Larry think um,

319
00:20:23,640 --> 00:20:28,119
Speaker 1: cheering you on is a good thing. The government budget deficits.

320
00:20:28,400 --> 00:20:31,040
Speaker 1: Did he speak at all about trying to reign in

321
00:20:31,160 --> 00:20:35,400
Speaker 1: the government. His priority is to reduce what is known

322
00:20:35,440 --> 00:20:41,600
Speaker 1: as the fiscal deficit um, and he is very public

323
00:20:41,640 --> 00:20:45,959
Speaker 1: about that that it's an essential part of getting Argentina

324
00:20:46,080 --> 00:20:53,399
Speaker 1: to be um economically and sustainably prosperous. How popular is

325
00:20:53,400 --> 00:20:57,119
Speaker 1: he at this point popular enough? You know, he's not

326
00:20:57,680 --> 00:21:06,359
Speaker 1: charismatic in the traditional uh peronist Argentina politician. However, having

327
00:21:06,440 --> 00:21:09,640
Speaker 1: been through, if you will, so many disappointments, the people

328
00:21:09,640 --> 00:21:12,240
Speaker 1: of Argentina are prepared to accept somebody who's a little

329
00:21:12,240 --> 00:21:16,000
Speaker 1: bit less charismatic and more pragmatic. And that's how he

330
00:21:16,119 --> 00:21:21,200
Speaker 1: has managed to be credible even after almost two years

331
00:21:21,240 --> 00:21:26,000
Speaker 1: in office, where he is essentially said, I'm translating a

332
00:21:26,000 --> 00:21:31,320
Speaker 1: bit um. You know, no gain without pain. Well, I'm

333
00:21:31,359 --> 00:21:33,800
Speaker 1: just struck by the idea that in emerging markets we're

334
00:21:33,840 --> 00:21:38,520
Speaker 1: seeing the moderates taking a more prominent role, where as

335
00:21:38,880 --> 00:21:43,639
Speaker 1: in developed nations you're seeing populists. You know, you can't

336
00:21:43,640 --> 00:21:47,359
Speaker 1: make this up. Um that among the top leaders in

337
00:21:47,480 --> 00:21:51,400
Speaker 1: terms of respect and credibility in the world today. This

338
00:21:51,480 --> 00:21:54,840
Speaker 1: man uh Macary is right at the top. I mean,

339
00:21:55,000 --> 00:21:58,000
Speaker 1: and if if any of us thought about it just

340
00:21:58,119 --> 00:22:02,879
Speaker 1: fifteen months ago, we just said that's that's impossible. So um,

341
00:22:02,920 --> 00:22:06,280
Speaker 1: you know, this is a big surprise. Met Winkler, thank

342
00:22:06,320 --> 00:22:08,399
Speaker 1: you so much for joining us. Always a pleasure to

343
00:22:08,400 --> 00:22:12,679
Speaker 1: have you. Met Winkler, Editor in Chief Emeritus of Bloomberg News.

344
00:22:15,280 --> 00:22:17,840
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.

345
00:22:18,160 --> 00:22:22,080
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

346
00:22:22,200 --> 00:22:25,640
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

347
00:22:25,680 --> 00:22:29,240
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa

348
00:22:29,280 --> 00:22:32,399
Speaker 1: abramowits one before the podcast. You can always catch us

349
00:22:32,440 --> 00:22:34,040
Speaker 1: worldwide on Bloomberg Radio.